In N Out Case Study

760 WordsDec 22, 20154 Pages
Case Study In-N-Out Burger 1. Why do some business analysts say that In-N-Out's business model is "counter intuitive"? In-N-Out’s business model is considered to be counter intuitive as it is opposite to the commonly found business model in the fast-food industry. Firstly, all the stores are privately owned by the promoter family only unlike other chains which use franchise based model to expand their business. Such conservative and slow expansion policy as adopted by In-N-Out is quite unique in its industry which usually focuses on rapidly expanding all across the country and abroad. This is why in spite of being in business since 1948; the numbers of stores of In-N-Out are far lesser than its peers like Burger King. McDonalds,…show more content…
The offering of logo-branded memorabilia and presence of secret customized menu are few of these measures to create a strong and cult fan base. 3. Why do you think In-N-Out Burger has an estimated 20% profit margin while McDonald's reports a 6% profit margin? In my opinion, the drastic difference in profitability margin is primarily due to the vastly different business models adopted by the two companies. Whereas In-N-Out focuses on higher margin on limited volume, McDonalds is totally focused on volumes. In-N-Out tends to have lower costs as there are minimal expenses spent on advertising and development of new menu, whereas McDonalds spends heavily on these aspects. Also, In-N-Out has created a loyal fan base which is willing to pay extra for the high quality burgers, thereby increasing In-N-Out’s profit margin. On the other hand, McDonalds finds itself right in the middle of highly competitive and price sensitive fast food industry, and with no major loyal fan base, it has to operate on minimal margins to achieve high volumes. Therefore, due to these differences in approach of the management, the profitability margins are so different for these two companies. 3. How would you describe the competition between In-N-Out Burger and Five Guys? As observed earlier, In-N-Out follows a fairly different strategy as compared to its competitors which totally

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